Abstract
Purpose: Based on 3,775 firm-year observations from 2009 to 2013 using publicly available disclosure data for Korean listed firms, this study examines whether and how firm-level governance characteristics are associated with investment in internal auditing proxied by compensation and the number of statutory internal auditors. Design/methodology/approach: The authors investigate the association between governance characteristics and investment in internal auditing proxied by compensation and the number of statutory internal auditors. Findings: The authors find that firms with greater ownership of the largest shareholders and with a higher proportion of outside directors invest more in internal auditing. These results indicate that firms with higher incentive and demand for monitoring are more likely to invest more in internal auditing. The authors further find that the positive effect of the largest shareholder ownership (board independence) on investment in internal auditing is attenuated in firms with greater board independence (ownership of the largest shareholders) suggesting that the complementary effect of the two governance mechanisms associated with internal auditing weakens as they function simultaneously. Research limitations/implications: The results provide regulators and investors with a clear picture of the governance characteristics of firms associated with investment in internal auditing. The results imply that both the largest shareholders and the outside board of directors play a significant role in resource allocation in internal auditing within a firm. The effect of allocation, however, can be attenuated contingent upon the combined characteristics of governance mechanisms. Originality/value: Using large amounts of public archival data, this study adds to the extant literature on firm characteristics associated with investment in internal auditing. This study also contributes to the literature by expanding the scope of research on executive compensation to the locus of statutory internal auditors.
| Original language | English |
|---|---|
| Pages (from-to) | 623-648 |
| Number of pages | 26 |
| Journal | Managerial Auditing Journal |
| Volume | 34 |
| Issue number | 5 |
| DOIs | |
| Publication status | Published - 2019 May 7 |
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All Science Journal Classification (ASJC) codes
- Business, Management and Accounting(all)
- Economics, Econometrics and Finance(all)
- Organizational Behavior and Human Resource Management
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Investment in internal auditing and governance characteristics : Evidence from statutory internal auditors in South Korea. / Park, Hyun Young; Lee, Ho Young; Kim, Jin Wook.
In: Managerial Auditing Journal, Vol. 34, No. 5, 07.05.2019, p. 623-648.Research output: Contribution to journal › Article
TY - JOUR
T1 - Investment in internal auditing and governance characteristics
T2 - Evidence from statutory internal auditors in South Korea
AU - Park, Hyun Young
AU - Lee, Ho Young
AU - Kim, Jin Wook
PY - 2019/5/7
Y1 - 2019/5/7
N2 - Purpose: Based on 3,775 firm-year observations from 2009 to 2013 using publicly available disclosure data for Korean listed firms, this study examines whether and how firm-level governance characteristics are associated with investment in internal auditing proxied by compensation and the number of statutory internal auditors. Design/methodology/approach: The authors investigate the association between governance characteristics and investment in internal auditing proxied by compensation and the number of statutory internal auditors. Findings: The authors find that firms with greater ownership of the largest shareholders and with a higher proportion of outside directors invest more in internal auditing. These results indicate that firms with higher incentive and demand for monitoring are more likely to invest more in internal auditing. The authors further find that the positive effect of the largest shareholder ownership (board independence) on investment in internal auditing is attenuated in firms with greater board independence (ownership of the largest shareholders) suggesting that the complementary effect of the two governance mechanisms associated with internal auditing weakens as they function simultaneously. Research limitations/implications: The results provide regulators and investors with a clear picture of the governance characteristics of firms associated with investment in internal auditing. The results imply that both the largest shareholders and the outside board of directors play a significant role in resource allocation in internal auditing within a firm. The effect of allocation, however, can be attenuated contingent upon the combined characteristics of governance mechanisms. Originality/value: Using large amounts of public archival data, this study adds to the extant literature on firm characteristics associated with investment in internal auditing. This study also contributes to the literature by expanding the scope of research on executive compensation to the locus of statutory internal auditors.
AB - Purpose: Based on 3,775 firm-year observations from 2009 to 2013 using publicly available disclosure data for Korean listed firms, this study examines whether and how firm-level governance characteristics are associated with investment in internal auditing proxied by compensation and the number of statutory internal auditors. Design/methodology/approach: The authors investigate the association between governance characteristics and investment in internal auditing proxied by compensation and the number of statutory internal auditors. Findings: The authors find that firms with greater ownership of the largest shareholders and with a higher proportion of outside directors invest more in internal auditing. These results indicate that firms with higher incentive and demand for monitoring are more likely to invest more in internal auditing. The authors further find that the positive effect of the largest shareholder ownership (board independence) on investment in internal auditing is attenuated in firms with greater board independence (ownership of the largest shareholders) suggesting that the complementary effect of the two governance mechanisms associated with internal auditing weakens as they function simultaneously. Research limitations/implications: The results provide regulators and investors with a clear picture of the governance characteristics of firms associated with investment in internal auditing. The results imply that both the largest shareholders and the outside board of directors play a significant role in resource allocation in internal auditing within a firm. The effect of allocation, however, can be attenuated contingent upon the combined characteristics of governance mechanisms. Originality/value: Using large amounts of public archival data, this study adds to the extant literature on firm characteristics associated with investment in internal auditing. This study also contributes to the literature by expanding the scope of research on executive compensation to the locus of statutory internal auditors.
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UR - http://www.scopus.com/inward/citedby.url?scp=85066905037&partnerID=8YFLogxK
U2 - 10.1108/MAJ-10-2017-1689
DO - 10.1108/MAJ-10-2017-1689
M3 - Article
VL - 34
SP - 623
EP - 648
JO - Managerial Auditing Journal
JF - Managerial Auditing Journal
SN - 0268-6902
IS - 5
ER -